11 July 2019: Skim milk is in the hands of strong sellers, and they ain’t budging

Skim milk is in the hands of strong sellers, and they ain’t budging. In fact, edible SMP actually rose in Germany last week, only €10, but a rise is a rise. Whey, on the other hand, continues its slide. After a slow start this year, cheese production is going gangbusters, throwing up a glut in whey supply, not troubled by whey consumption dropping in China by 20% in the last quarter. It seems that the sum of cheese plus whey gives greater returns than drying milk for skim, so that explains the current dairy balance sheet.

Whether skim could be persuaded downwards depends on how real the Chinese beef demand story is. It is still comfortably inside the mid price for the last six years, after the peak in 2013 and last year’s bottom. If the European calf milk replacer market is large enough to weigh on the global balance sheet, I don’t know, but if we see dairy farmers move towards more whey-based powders and abandoning skim, that could bring the SMP price down, but it is likely to be deep into the autumn before that would take effect. Plus, the dynamics of the edible SMP market will probably have more effect.

Currency still languishes, as business views the bus-obsessed favourite to win the leadership with little confidence, whether he’s making models of them, writing porkies on them or throwing ambassadors under them ……..

BDC agri is the UK broker for Lacto Production milk and whey powder products. For further information and prices, contact Greg Dunn on 01206 381521 or g.dunn@blackdiamondcommodities.com

19 June 2019: Markets on holiday?

Just a brief note this week, as prices are unchanged.

Skim milk is down a touch (€10-30) on the Dutch market and whey is unchanged. Skim traders are still peddling the ‘buy now and avoid the rush’ story, but as we are now in the annual contracting season for calf milk replacer, producer buyers could be spooked into covering their short position, with a potentially cumulative effect pushing prices yet higher. China remains the main threat to skim falling, but then again, they are the canniest buyers of all, and will probably find a way to engineer the market down, especially as the US is awash with milk and have to dump it somewhere, from where it will probably be resold to China!

No news as such on whey, so a quiet market for the summer in prospect.

Sterling looks about as healthy as it could, given the final two contenders for saving the un-saveable, are either the man who broke the NHS or the man who wants to sell it to Donald Trump.

BDC agri is the UK broker for Lacto Production milk and whey powder products. For further information and prices, contact Greg Dunn on 01206 381521 or g.dunn@blackdiamondcommodities.com

12 June 2019: New leap in Chinese purchases of dairy products

Bit of an essay this week, so pull up a chair ...

I have finally seen the reasoning of the Dutch companies that cornered the milk powder market. As we all know and grumble about, it was late October that skim milk powder started the long march north, but the signs were there as early as August that ASF would decimate the Chinese pork market, and it was a case of joining the dots to realise that the lack of pork would stimulate beef demand, which would require skim milk rather than sweet whey. It's worth reading the article below, which was written in French and, with a lot of help from Google, I have translated:

New leap in Chinese purchases of dairy products

Posted on Friday June 7th, 2019 by Virginie Pinson

In a context of relatively tight world supplies, Chinese purchases of dairy products were very dynamic in April. Europe benefits from the trade war between the United States and China.

https://lesmarches.reussir.fr/sites/les_marches/files/LMH454_LAIT.

The world's availability of milk remains fairly modest. Cumulative collection of the five major exporting basins (Argentina, Australia, New Zealand, EU-28, US) continues to weaken, posting -0.7% in March compared to last year, according to Cniel, which points out that the rise in Europe (+ 1.2%) is offset by the fall in New Zealand (-8.2%) related to drought. The decline remains in Australia and Argentina (respectively -10.6% and -8%) and the United States production fell 0.4%, the first in five years.

Effects of African swine fever

The dairy market is, in turn, suffering the effects of African swine fever, which decimates the Chinese herd. Thus, whey prices are suffering from the prospects of falling Chinese demand that uses this product in the diet of pigs. Conversely, the slump in pork supply is pushing China to switch to other proteins, including dairy, which is boosting already dynamic imports. In April, Chinese imports of dairy products soared by 31% in volume and 36.7% in value. In particular, purchases of milk and cream jumped 73% in volume, thanks to a 16.3% drop in the purchase price. Purchases of skim milk powder also increased (+ 30.9% in volume, + 34.8% in value). If New Zealand remains the main supplier (57% of volumes), the European Union now holds 26% of market share, because its shipments leap 212%, due to the place left by the United States. Their exports to China dive (-89%), undermined by the trade war.

Sylvain at Lacto Production makes the very good point that this bulge of unsold intervention stock really has grown whiskers, some of it is between three and five years old, so the bold traders could be left with egg on the faces if there's a wholesale dumping of long books. SMP is down a tad on both edible and animal feed grade in Germany, and whey is also down €10 in Holland. So with continued strong demand from China, against a market that was pushed maybe too high, we may be looking at a price plateau for a while.

The Pound is still basking in banana republic status, because of you-know-what. I think it was the Edwardian philosopher William Hazlitt who nailed it, but to paraphrase: 'the candidates are like rival stage-coaches, neck and neck on the same road, cantering towards the same destination, splashing each other with mud'. A Guardian headline from a couple of days ago also chimed with me - Behold, the Tory Leadership Candidates: all in denial, all in dreamland.

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BDC agri is the UK broker for Lacto Production milk and whey powder products. For further information and prices, contact Greg Dunn on 01206 381521 or g.dunn@blackdiamondcommodities.com